Exchange-traded funds (ETFs) are an efficient way for small investors to invest in a specific index. In this Vox Views video, Semyon Malamud discusses the implications of the growing number of ETFs. In a perfectly efficient market, the price of the ETF should be equal to the net asset value, but deviations create arbitrage activities and lead to market inefficiencies. The video was recorded in April 2016 at the First Annual Spring Symposium on Financial Economics organised by CEPR and the Brevan Howard Centre at Imperial College.
Semyon Malamud, 11 May 2016
Roger E. A. Farmer , Carine Nourry, Alain Venditti, 13 January 2013
Existing literature continues to be unable to offer a convincing explanation for the volatility of the stochastic discount factor in real world data. This paper provides such an explanation, demonstrating that financial markets, by their very nature, cannot be Pareto efficient except by chance. Although individuals in our model are rational; markets are not.